Jun 29, 2017

A global surveillance deal

Private equity firm Francisco Partners yesterday offered to buy Sandvine Corp., a Toronto-listed provider of network policy control solutions, for C$4.15 per share. This tops a C$3.80 per share bid from Vector Capital, which SandVine previously accepted and gave the company a fully-diluted equity value of around C$483 million. Vector now has five days to figure out its next step, but this deal might have more consequence than a typical private equity bidding war, particularly in the area of global surveillance.

Turkey deal: Francisco seeks to combine SandVine with existing portfolio company Procera Networks. If that latter company sounds familiar, perhaps that's because it was accused of providing technology to Turkey's government that allowed the country's strongman president to spy on his own citizens – via deep-packet inspection technologies that SandVine also provides. Details of the relationship were leaked by Procera employees, some of whom reportedly believed the company's ethical compass shifted when Francisco took control in 2015. Francisco and Procera, for the record, denied any wrongdoing.

Flynn factor: Francisco also controls Israeli cyber-surveillance company NSO Group, whose software was used by the Mexican government to spy on journalists and anti-corruption advocates. NSO's paid advisors have included Michael Flynn, the former Trump national security advisor who also last year provided consulting work to Francisco.

Mum's the word: Vector Capital doesn't have any existing portfolio companies in this space. But it also isn't commenting on how it would manage or monitor Sandvine, in terms of sales to certain foreign government entities.

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